Pago Pago, AMERICAN SAMOA — Testimony from representatives of two off-island financial and insurance companies has raised serious new questions about whether the American Samoa Government's controversial $10.1 million investment of ARPA interest funds was ever covered by insurance, contradicting previous statements made to lawmakers by administration officials.

During a hearing before the Senate Government Operations Committee yesterday, representatives from Trade and Merchant Trade Services and Southern Pacific Insurance Company told senators they had never issued an insurance policy guaranteeing recovery of the government's investment and had no direct contractual relationship with ASG regarding the transaction.

The testimony appeared to directly conflict with earlier statements by Governor Pulaali'i Nikolao Pula's Executive Advisor on Finance, Brett Butler, and Insurance Commissioner Peter Fuimaono.

In previous testimony before the committee, Butler stated that the investment was insured through Southern Pacific Insurance Company and that ASG had paid approximately $300,000 for the coverage. Fuimaono testified that the insurance arrangement involved Trade and Merchant Trade Services, while Southern Pacific Insurance served as the guarantor.

At the outset of yesterday's hearing, committee chairman Senator Togiola T.A. Tulafono summarized the information lawmakers had received thus far. He noted that the committee had been informed that ASG purchased insurance coverage from Southern Pacific Insurance Company and paid a premium of approximately $300,000 to protect the $10.1 million investment.

The committee also sought clarification regarding the role of Trade and Merchant Trade Services, as previous testimony suggested that the insurance relationship existed primarily between ASG and Southern Pacific Insurance.

The first witness, Marshall Jablon of New York-based Trade and Merchant Trade Services, testified remotely from Cyprus.

Jablon immediately disputed the committee's understanding of the arrangement.

"Sir, the information that you're telling me is just not true," Jablon stated.

He explained that his company had never conducted business directly with the American Samoa Government and had never entered into any agreement with ASG concerning the investment.

"We've never had a relationship with the American Samoa Government," he testified. "I've been in business in New York City since 1998. We are a provider of documentary letters of credit, standby letters of credit, and guarantees."

According to Jablon, his company's involvement stemmed from a request made through a broker working on behalf of parties connected to the investment transaction, not ASG.

He further explained that because of his affiliation with Southern Pacific Insurance Company, he approached the insurer to provide financial backing for a guarantee issued by Trade and Merchant Trade Services.

Jablon emphasized that the beneficiary of the guarantee was McKinley, not the American Samoa Government.

A second witness, Paul Atkinson, a strategist with Trade and Merchant Trade Services who testified from Manchester, England, provided additional details regarding the transaction.

Atkinson told lawmakers that the applicant for the guarantee was Beech Tree Finance Company Limited, a Texas-based company involved in the investment arrangement.

"The company, our applicant, was a company called Beech Tree Finance Company Limited based in Texas," Atkinson testified.

According to Atkinson, Beech Tree represented an investment banker involved in raising funds through a private placement in which McKinley participated.

When asked by Senator Togiola to explain the nature of the guarantee, Atkinson said it was not investment insurance and was never intended to guarantee repayment of the government's $10.1 million.

Instead, he explained that the guarantee related specifically to the protection of funds while they remained in an escrow account reportedly maintained by attorney Timothy Stein through JPMorgan Chase Bank.

"The $10.1 million, as I understand it, was to be placed in an escrow account," Atkinson said.

He explained that Trade and Merchant Trade Services had been asked to provide a guarantee against the unauthorized depletion of funds in that escrow account.

According to Atkinson, if an external fraud event occurred while the money remained in escrow, a claim could potentially be made under the guarantee.

He stressed that neither Trade and Merchant Trade Services nor Southern Pacific Insurance dealt directly with the American Samoa Government regarding the arrangement.
Perhaps the most significant testimony came from Matt Wade, President of Southern Pacific Insurance Company.

Under questioning from Senator Togiola, Wade said he had never personally discussed insurance coverage for the investment with government officials and had never confirmed the existence of any insurance policy covering the transaction.

When asked whether Southern Pacific Insurance had issued a policy guaranteeing the recovery of the $10.1 million investment should the investment fail, Wade's answer was unequivocal.

"I did not personally talk with anybody within the American Samoa Government," Wade stated.

He acknowledged there may have been attempts to verify information through third parties, but said he never confirmed that any coverage existed.

When Senator Togiola asked directly whether ASG had ever purchased insurance protection from Southern Pacific Insurance Company, Wade replied:

"That is correct."

Wade explained that Southern Pacific's involvement was limited to supporting the guarantee arrangement previously described by Jablon and Atkinson.

Togiola then pressed further.

"So if they have told the committee that they've purchased insurance from Southern Pacific Insurance Corporation that would guarantee the return of the $10.1 million put in by the American Samoa Government, that would be false?"

"That would be correct," Wade responded.

Following the witnesses' testimony, senators discussed possible next steps in the committee's investigation.

Senator Togiola expressed frustration over what he described as conflicting and inaccurate information presented to lawmakers throughout the inquiry.

"The committee has been lied to," Togiola declared.

"There is no insurance coverage to guarantee the return of the $10.1 million."

He further argued that government officials failed to exercise adequate due diligence before committing public funds to the investment and criticized the manner in which the transaction was handled.

Togiola stated that testimony received by the committee indicates the Attorney General's Office advised against proceeding with the investment. He also claimed that the investment contract was never submitted to the Attorney General for legal review before execution.

The senator pointed to previous testimony from Butler and the Acting Treasurer, who indicated that Governor Pulaali'i authorized the investment.

According to Togiola, the committee is preparing a report expected to be released Thursday recommending that the matter be referred for criminal investigation.

He also said lawmakers intend to discuss with the Attorney General's Office the possibility of requesting an FBI investigation into companies involved in the investment transaction.

Should the Attorney General decline to support a criminal inquiry, Togiola indicated that lawmakers may seek assistance from the U.S. Department of the Interior.

Additionally, the Fono is expected to seek an advisory opinion from the court regarding the legality of the Governor's authorization of the use of ARPA interest earnings without legislative appropriation approval.

Several senators voiced support for continuing the investigation and pursuing further action.

Among those supporting Togiola's recommendations were Senate President Tuaolo Manaia Fruean, Senator Magalei Logovii, Senator Ma'o Fa'auma Gogo, and Senator Tupuola L. Sopoaga.

Lawmakers are also expected to consider a resolution that would authorize the Senate Government Operations Committee to continue its work as a Senate Select Investigative Committee after the current Fourth Regular Session of the 39th Legislature concludes.

If approved, the resolution would allow senators to continue investigating the $10.1 million investment and related issues even after the regular legislative session adjourns.